Stocks overcame concerns about rising oil prices to close on an upbeat note, as a stronger-than-expected revision to gross domestic product growth buoyed shares across the board.
A series of reports, including GDP, helped major stock indexes hold on to gains through the session, even as oil prices moved to their highest levels in two months.
Providing ballast was the Commerce Department's report that GDP - which measures the market value of all goods and services produced in the U.S. - expanded at a 2.2% annual rate, topping its previous estimate of 1.6% and economists' projections for a 1.8%. Meanwhile, the Federal Reserve said in its beige book report that most areas of the U.S. had moderate economic growth in the first few weeks of November as consumer spending grew.
The Dow Jones Industrial Average ended higher, as did the Nasdaq and the S&P 500 .
Data that suggests the Fed is keeping a handle on the economy rattled the fixed-income markets. U.S. Treasury prices closed slightly lower, with the 10-year benchmark yield slightly above 4.50%, as signs of economic strength keep pressure on policy makers to continue lifting interest rates.
Crude oil closed slightly above $62 a barrel as colder weather drifted eastward across the U.S. and fresh government data showed shrinking supplies of crude, gasoline and heating oil.
Analysts had been expecting a draw down in oil, but the decline in gasoline and distillates, which includes home heating oil, was unexpected, according to the Platts Survey.
Exxon and other energy stocks led the S&P 500 Index higher on the news, with Exxon closing at a 52-week high.
The government also reported that corporate profits increased 4.2% in the third-quarter. Profits were up 30.9% year-over-year, the fastest growth in 22 years.
"The most recent data confirms the basic picture we've seen for some months is that it looks like we're heading toward a soft landing, inflationary pressure is easing, and that the housing market hasn't collapsed as some feared," said Ed Keon, chief investment strategist with Prudential Equity Group. "Soft landings, when we've had them, are great for stocks."
The pair of economic reports also indicated the housing slump hasn't been too
much of a drag on the economy, and offset a Commerce Department report released
Wednesday that showed new home sales in October suffered their largest drop
Another beneficiary of the healthy economic snapshot was the dollar, which rebounded from a 20-month low against the euro but was mixed against other major currencies. Gold prices moved higher.
Looking ahead to Thursday, all eyes will be on November retail sales, while new jobless claims will be reported at 8:30 a.m. New York time. The figure is expected to drop to 315,000 from 321,000 last week.
Moderate Growth Indicators
The Fed's "Beige Book" indicated that most regions of the U.S. experienced moderate growth through the first weeks of November.
The report said economic conditions have improved over the past month. Retail sales rose, with the exception of housing and cars. The Beige Book reported tight labor markets, but moderate wage growth. The report also said the housing market remains soft.
Economists at Deutsche Bank believe the U.S. economy has stalled. In a note to clients, Deutsche Bank cut its fourth-quarter real GDP growth forecast to zero from 1.0%, following Tuesday's weaker-than-expected durable goods report and concerns about retail sales.
New Home Sales Surprise Analysts
Meanwhile, sales of new homes fell in October by the largest amount in three months, a fresh sign of the slowdown in the once-hot housing sector.
New home sales fell 3.2% in October, more than the 2.3% decline that was expected, according to a Dow Jones survey. Investors had little reaction to the housing number, focusing on the strong gross domestic product report.
Pfizer closed higher after the drug company said it will cut its U.S. sales force by 20% in an attempt to deal with sluggish sales.
Shares of Tiffany settled in positive territory after the fine jewelry retailer beat earnings estimates. The company said its third-quarter net income rose to $29 million, or 21 cents a share, higher than the average earnings estimate 16 cents a share forecasted by analysts surveyed by Thomson First Call. Tiffany also raised fiscal 2006 guidance.
J.P. Morgan cut its rating on the NYSE Group to neutral from overweight saying it believes the company will continue to be a global exchange winner, but the broker feels the positive news is already priced in the stock.
London's FTSE-100, Frankfurt's DAX and the Paris CAC-40 all closed higher bolstered by the better-than-expected U.S. gross domestic product report. The FTSE CNBC Global 300 Index was also higher.
GlaxoSmith Kline and AstraZeneca were among the top European gainers on expectations of cutbacks following Pfizer's announced job cuts.
Truck maker MAN leading the way for German stocks. MAN rose in Frankfurt trading after the second-largest shareholder in Swedish truck maker Scania AB said it was a considering a counter bid for MAN.
Drug maker Novartis may be prepared to sell Gerber Products, one of the biggest names in baby food, to Nestlé , The Wall Street Journal reported. Nestlé is already in discussions with Novartis to buy a medical-nutritional business and the two businesses together could fetch $5 billion, the paper said. Nestlé had no comment on the report when contacted by CNBC Europe.
Nikkei Tops 16,000
In Japan, the Nikkei closed above the 16,000 level as investors were cheered by the country's stronger-than-expected industrial output data in October.
Banking and construction plays helped the rise in Asia outside of Japan, with Taiwan's TAIEX extending a recent rally to close near levels unseen in over 6 years. Hong Kong's Hang Seng Index recovered after suffering its biggest point decline on Tuesday, since the Sept. 11 terror attacks.